Post on 18-Dec-2015
Why use Seychelles?
Contents
Where is Seychelles?
Tax system in Seychelles
Why use Seychelles as an offshore jurisdiction?
Offshore in Seychelles
Seychelles International Business Company and its possible uses
Special License Company and its possible uses
Other offshore products and their uses
Population 80,000
South of Equator
+4Hrs GMT
Abacus Seychelles
Where is Seychelles? Independent nation comprising of a group of
islands situated in the Indian Ocean Democratically elected Government Strategically located 7 degrees south of
equator Modern reliable infrastructure Currency: Seychelles Rupee English, Creole and French are official
languages Gujarati widely spoken Situated at GMT +4 hours; i.e. one and half
hours behind India Population of 80,000 Large Indian presence in telecommunication,
construction, tourism, health and retail sector Bharti and Tata Groups have presence Double tax treaty with India being negotiated
Population 80,000
South of Equator
+4Hrs GMT
Abacus Seychelles
Tax system in Seychelles
+4Hrs GMT
Source based – Only income earned from doing business in Seychelles is subject to tax (one exception to the source based rule – the Special License Company)
Only one head of income subject to tax - business tax
No taxation of salaries, house properties, capital gains or income from other sources
No transfer pricing regulations
Tax rate for domestic companies upto 40 per cent
Abacus Seychelles
Why use an offshore jurisdiction like Seychelles?
Reasons for going offshore and utilising offshore companies for tax planning include: Ease of setting up companies and doing business Residence of intangible and intellectual property Free remittance of profits and capital Access to tax treaties Security of property rights Low transaction costs for example zero capital / stamp duty on share transfers Banking privacy Enhanced privacy Customs and duty exemptions Fewer restrictions Sanctity of contracts Foreign investments inducements Higher yields and returns Bank facilities
Population 80,000
South of Equator
Abacus Seychelles
Offshore in Seychelles Offshore legislation introduced in 1994
Initial offshore legislation provided for International Business Companies (IBC) or non resident Seychelles company
Success of the IBC lead to development of more value added areas of offshore business
Since 2003, Seychelles started a rapid expansion of its treaty network
Use of domestic companies called Special License companies to avail of treaty network
No sanctions imposed against it by OECD
Other products include Free trade zones Trusts Limited liability partnerships
Abacus Seychelles
IBC Unique type of company which can undertake any activity outside the
Seychelles except for banking, insurance, mutual funds and trusts Minimum of one shareholder and director Zero tax liability in Seychelles Can be incorporated within 24 hours Competitive license fee fixed for life No requirement to disclose shareholder No requirement to file annual returns with the Registrar No filing requirements Minimum paid up share capital USD 1 All civil proceedings heard by Judge in Chambers Change of domicile can be effected easily Confidentiality is guaranteed Is considered as a non resident company and cannot avail treaty
benefits
Abacus Seychelles
IBC incorporation till December 2005
0
5000
10000
15000
20000
25000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Actual
Cummulative
Abacus Seychelles
Possible uses of an IBC…
Offshore recruitment agency and outsourcing
Domestic recruitment agency in India
Seychelles IBC – Offshore
recruitment agencyCustomer overseas
Supplying manpower under contract
Manpower
Manpower recruited by offshore agency
Supplies manpower to offshore recruitment agency
Abacus Seychelles
…Possible uses of an IBC…Advantages of this structure Ability of the offshore recruitment agency to assume responsibility for non-wage obligations:
Employee’s retirement and savings plans Superannuation liabilities
No fringe benefit tax, perquisite taxation, etc No withholding taxes on salary paid to employee As a result employees take home pay higher No service tax / VAT or GST or other domestic taxes payable on fees received by offshore
recruitment agency from customer Zero tax in Seychelles on fees received from customer Zero tax liability for employee in Seychelles on salary received Could simplify employees tax liability – ie avoid being taxed both in the country of receipt of
salary and in the country to which deputed too under the contract but this would need to be examined on a case to case basis as is dependent on the residential status of each employee
Structure could also be used by large companies who regularly depute individuals to overseas branches / group concerns
Issues Ensuring an arms length price between the domestic recruitment agency in India and the
Seychelles IBC
Abacus Seychelles
Royalty / Intellectual property (IP) company
…Possible uses of an IBC…
Seychelles IBCTransfer IP / royalty to a Seychelles IBC
Company X Company Y Company Z
Pays royalty/ income for use of IP to IBC
Royalty / IP income exempt from tax in Seychelles
IP protected from competitors – no publicly available information about the Company
However, the ability to transfer an IP to an offshore jurisdiction depends on domestic laws
…Possible uses of an IBC…
International trading company
Case study
Mr X an Indian businessman, resident in India buys from Bangladesh, processes it in Pakistan and sells it in Japan
Mr X wonders if he can structure the business in a tax effective manner using offshore
Possible Offshore solution (Indian tax implications to be examined by Indian tax advisors)
Mr X
Seychelles IBC – Zero tax liability in
Seychelles on profits accruing
Bangladesh – Purchases raw material
Pakistan – processes
leatherSold in Japan
International e-training Mr Y, a leading international tax expert based in India wishes to offer international tax training
courses over the internet The participants will be from countries all over the world who will pay via the internet; lecturers
will also be from all over the world He structures the business in a tax effective manner using offshore
…Possible uses of an IBC
Mr Y
Seychelles IBC – Zero tax liability in
Seychelles
Hosts training website
Student A
Student B
Offshore bank
Pay directly into the offshore bank
Lecture A – Europe
Lecturer B – US
Paid directly by IBC
Abacus Seychelles
Advantages of structure
Profits from the e-training course are exempt from tax in Seychelles Easier to pay lecturers – no exchange controls Lecturers not liable to pay tax on money received by them from the IBC
in Seychelles – no withholding taxes, etc Mr Y is liable to pay tax in India on only income received by him from
the IBC – ie salary or dividends distributed to him
…Possible uses of an IBC
Abacus Seychelles
…Possible uses of IBC
Other possible uses
Service based activities like marketing, sales and distribution, agency agreements
Financial and consultancy services Combined with larger structures to make them more tax efficient Invoicing and reinvoicing Few of the large companies undertaking activities from
Seychelles – Heinz, Lehman brothers, Chelle Medicals (listed on the Singapore Stock market)
Regional headquarters (eg for Asia Pacific or EMEA) - No PE risk or risk of attribution of regional profits
Abacus Seychelles
Special license companies (CSL)…
Seychelles domestic company Used to avail treaty benefits
Taxation Liable to Seychelles business tax at the rate of 1.5% on its world-wide taxable income
(exception to source based rule)
Exempt from withholding taxes on dividends, interest and royalties
Exempt from stamp duty on property transfers, share transfers and other business transactions
Compliance Minimum of 2 Directors – preferably Seychelles resident to prove management and
control in the Seychelles Seychelles resident Company Secretary required Annual company return, tax returns and audited accounts to be filed
Abacus Seychelles
…Comparison of tax rates among different Seychelles entities
Tax regime Tax rate WHT / cap gains Tax treaties
Normal companies
Territorial 40% Div.: 15%
Int.: 10/40%
Roy.: 0/15%
Yes
IBC N.A. 0% 0% No
CSL World-wide 1.5% 0% Yes
Abacus Seychelles
Treaty network…
Ratified/In Force
ChinaIndonesiaOmanSouth AfricaBotswanaMauritiusMalaysiaThailandVietnam
Signed
ZimbabweVietnamBelgium CyprusQatar
Negotiations Concluded
Egypt UAEBahrain RussiaCzech RepublicTunisiaNamibiaKuwait
Negotiations in
Progress
LesothoCubaBahrainIvory CoastBurundiMaltaMoroccoPhilippinesUganda
Agreement to Negotiate
IsraelPortugalTurkeyTanzaniaZambiaSwedenKenyaIndia
Abacus Seychelles
…Treaty networkCountry Project duration for
permanent establishment purposes
Maximum Tax Rates applicable in the country of source
Dividends Interest Royalties
Botswana >183 days 5% & 10%(b) 7.50% 10%
China >12 months 5% 10% 10%
Indonesia > 6 months 10% 10% 10%
Malaysia >6 months 10% 10% 10%
Mauritius >12 months 0% 0% 0%
Oman >6 months 5% 5% 10%
South Africa >6 months 0% 0% 0%
Thailand >6 months 10% 10% or 15% (e) 15%
Vietnam >6 months 10% 10% 10%
(a) Lower rates applies to companies holding at least 10% capital.
(b) Lower rates applies to companies holding at least 25% capital.
(c) Lower rates applies to companies holding at least 20% capital.
(d) Lower rates applies to companies holding at least 15% capital.
(e) Lower rates applies if paid to any Bank carrying on a bona fide banking business.
(f) Higher rates applies to companies holding investment other than portfolio investment.
Abacus Seychelles
Abacus Seychelles
International Trade Zone
Undertaking redistribution, light assembly, manufacturing, processing and export services from the Seychelles
Can undertake management services from Seychelles and offer the following benefits: Tax free operations of regional headquarters eg (for Asia Pacific or
EMEA) - No PE risk or risk of attribution of regional profits License fee fixed for life Residency guaranteed for owners and operators
Benefit from trade agreements which Seychelles has signed Preferential access to EU and US markets using the Lorne
convention and African Growth Opportunities in America Member of the Common Market for Eastern and Southern Africa
Abacus Seychelles
Offshore Trusts
What assets can be held by an offshore trust? Shares and stocks in both quoted and unquoted companies. Investment portfolios. Real and intellectual property Bank deposits. Life assurance policies issued on the life of the Settlor Most other types of asset
Advantages of Offshore Trusts Confidentiality Wealth protection Tailored to specific family requirements Recognized in all common law jurisdictions Increasing recognition in important civil law jurisdictions An important tool in international income, capital gains and estate tax planning Used by corporations for employee benefit plans, retirement and stock option
schemes, insurance plans and special financing arrangements
Abacus Seychelles
Seychelles Trusts
Key features Seychelles trust legislation is modern, comprehensive and provides for the formation
of versatile offshore trusts Simple process facilitated through a Seychelles licensed trustee A copy of trust deed not required to be filed One off registration fee of USD 115 payable to Registrar
Advantages Zero tax on income An international trust can hold property worldwide (except for land in Seychelles) Transfer or disposition be a person creating an international trust cannot be
invalidated by any foreign rule of forced heirship No restrictions on the accumulation of income Settlors or trustees can themselves be beneficiaries Law governing an international trust is the law chosen by the settlor to be the proper
law No requirement to mention the name of the settlors or the beneficiaries (except for
beneficiaries who are Seychellois nationals) Provision for discretionary trusts, purpose trusts, charitable trusts, etc
Abacus Seychelles
Seychelles trusts.. Possible solution?
Pre – migration tax planning – RETURNING NRIs
DR C, a prominent Indian Doctor who worked in UK for 25 years wishes to retire and return to India
DR C wonders if he can mitigate his tax liabilities through pre migration tax planning
Possible solution 1
Dr C transfers all his foreign assets to a trust established by him prior to moving to India
Trust administers the assets for the beneficiaries as determined by Dr C
Issues
If the beneficiaries are Indian tax residents, would they be subject to tax on income accumulated in the trust but not distributed by the offshore trust?
Abacus Seychelles
Re visit
Where is Seychelles?
Tax system in Seychelles
Why use Seychelles as an offshore jurisdiction?
Offshore in Seychelles
Seychelles International Business Company and its possible uses
Special License Company and its possible uses
Other offshore products and their uses
Population 80,000
South of Equator
+4Hrs GMT
Abacus Seychelles
THANK YOU FOR YOUR INTEREST IN SEYCHELLES
Let’s keep the dialogue on Seychelles going Write to us at:
anuj@abacus-offshore.com malika@abacus-offshore.com
Abacus Seychelles Ltd Mont Fleuri Mahe, Seychelles
www.abacus-offshore.com
+248 610 780
Abacus Seychelles